are right or wrong, will certainly impact major industries of this country. It seems to me that there should be at least some kind of a proceeding or hearing in which various interested groups are able to participate. As I understand it, there was at least some kind of informal understanding. It is not clear how the understanding was reached. Mr. Minnetti has indicated some of those who have been awarded the routes after being in touch with Board members. There appears to have been some understanding within the Board that this was going to be the policy, and then it was strengthened in the refusal to have any hearings, in the way that applications were disposed of before the Board, and I suppose our question is really whether this is the best and most effective way of implementing a policy.

Mr. WEST. I think not, Senator. I think Mr. Minetti has been most interested and most active in attempting to articulate some standards by which we can determine which cases should come up for hearing and which should not be passed on. From my personal knowledge, I know he is very active in that area.

CAB STAFF STUDY ON ROUTE ENTRY, THE DOMESTIC ROUTE SYSTEM (1974)

I think we are also susceptible to the charge that we conduct our business in a way that no one knows what factors we take into consideration. Judge Friendly has been complaining about this for years and years. I think that out of the route study-and I think we have to be very careful not to make this too restrictive-but we have to develop standards that can not only be determined within our staff and passed on to the Board, but provide a basis for judicial review of our failures. Senator KENNEDY. I think that would be helpful. I would like to finish this point and then yield to Senator Thurmond.

We usually follow a rough rule of about 15 minutes or so. Senator Thurmond has been here and I would like for him to cover additional areas. The principal point concerns the criteria that has been outlined by the staff report. It is, I would think, a fair characterization to say that they are extremely restrictive.

Mr. WEST. That is not a Board release. That was a staff release, and I think you will recognize that I have to be extremely careful in commenting with regard to that because that is a matter out for comment pending before the Board which we will pass on in the future. I am aware of a number of criticisms of the staff release.

Senator KENNEDY. I think all of us are familiar enough with various reports are prepared at that level. They do not necessarily represent the view of the Board, and we do not want to view them as a characterization of the attitude of the members of the Board if they are not. I would like to yield.

FIRST-CLASS SERVICE AND THE NEED FOR LOW-FARE TRANSPORTATION

Senator THURMOND. Thank you. I will ask a few questions and then turn back. Mr. O'Melia, in view of the time required and the appropriation limitations of CAB, would you recommend that the CAB no longer have authority to assign new routes? Could your resources be more effectively used if

Mr. O'MELIA. Senator, the Federal Aviation Act would have to be amended to allow the Board to have freer entry into the industry by

other carriers. The present policy of entry is in fact set forth in section 401 of the Federal Aviation Act.

Senator THURMOND. Whatever is necessary to give the public better rates, because air travel now is a mass form of travel, of course, as you know, and that should be encouraged over automobiles. I live about 9 hours from Washington down in South Carolina, and it costs, if I take my family, four or five people at $45 apiece and maybe a little more, you can see what it costs. With an automobile you can go down there a lot cheaper.

Well, now, it seems to me for the average family there ought to be some way a man could travel by air and save a lot of money. I am wondering, too, is it necessary to have a first-class fare now? What is the purpose in having a first-class fare?

Mr. O'MELIA. Well, there are a lot of businessmen who I presume want to travel in connection with this business and cost is not a real obstacle, so they go first class.

Senator KENNEDY. It is not the real object because the taxpayers are paying for it; they are subsidizing first class.

Senator THURMOND. You carry very few people on the plane. If you take more on the plane, that ought to reduce the cost to the rest of the passengers, should it not?

Mr. O'MELIA. Let me have our rate expert answer your questions. Mr. SIMMS. In the recently concluded domestic passenger fare investigation, one of the issues concerned the lawfulness of first-class fares. The Board, after a very extensive evidentiary hearing, concluded that the first-class fares have historically been too low, that they have burdened the coach-fare level. In other words, the carriers have in the long run lost money on the service and the Board as a consequence directed that the first-class fares be increased in stages over a 2-year period up to the level of the full costs.

Now, there are substantial questions as to the extent, as to whether first-class service will continue to be attractive at the much higher levels that will be in effect after the phase-in-the complete phase-in is completed. But experience with fairly high differentials in, for example, in the international markets, indicates there is a market for a first-class service at very sizable premiums.

Senator THURMOND. You can get three seats to the row if you have tourists and only two to first class.

Mr. SIMMS. Yes.

Senator THURMOND. And the airline would make more money if it was all tourists, would it not?

Mr. SIMMS. It depends upon the price the airline gets for it. In the past the price has not fully reflected the cost differential. It costs more per seat if your seat is larger.

Senator THURMOND. I will give you my illustration of going to Columbia, S.C., from Washington. It costs more, about $10 more, to travel first class. If I travel first class, two seats to the row, it will be double that amount, probably $55, two of us $110, whereas if you have three seats, $45, that is $135 the airline will get, is it not?

Mr. SIMMS. Yes.

Senator THURMOND. And were your first-class passengers not costing the public more to travel?

Mr. SIMMS. The answer to that is at the present time, yes.

Senator THURMOND. Well, then, why do you not raise them?

Mr. SIMMS. We have.

Senator THURMOND. The airlines I travel on still have first class. Mr. SIMMS. The Board has just completed its investigation and the order is effective April 29. Beginning April 29 the first-class fares be higher.

Senator THURMOND. I travel tourist all the time. I see a lot of little government employees here up in the front section traveling first They do not have to pay it. It is a different thing. But I think service ought to be for the masses of the people, not for the rich and no for the high and mighty, but to give the lowest rate possible to serve the people. I think it is your duty to provide that.

Mr. SIMMS. Sir, the statute quite clearly precludes the Board from dictating to the carriers the type of service which the carriers provide. In other words, the carriers are free under the law to provide a firstclass service if they wish, and there is no way the Board can directly interfere with that discretion.

What the Board can do and has done is ensure that the carriers make a proper charge for those services so that the more luxurious service is not conducted in a manner which burdens the mass traveler.

Senator KENNEDY. Could the Senator yield just on that point?

Senator THURMOND. Yes; I will be glad to.

Senator KENNEDY. On Senator Thurmond's point, there is no reason why you could not permit World Airways to provide that same service on a given route, is there?

Mr. SIMMS. That raises a whole new, quite a different set of questions. Senator KENNEDY. To provide what Senator Thurmond so eloquently stated here this morning, you cannot require, as I understand it, that an airline perform a certain kind of service, but there is no reason why you cannot give a particular carrier authority to fly a given route down to South Carolina. You could do that, could you not? If some carriers were to take out all the first-class seats, if some of them wanted to do that and provide service at lower fares, you have the power to do that?

Mr. SIMMS. We have the power to certificate a carrier who, in his application, represents that he will provide that type of service, yes. Senator THURMOND. And not only that, but first-class people get a little better meals and get wine with their meal, and who is paying for that?

Mr. SIMMS. Under the Board order all of those costs will be borne by the first-class user.

Senator THURMOND. For an hour or two, even up to 5 hours, is it necessary to serve meals? Cannot people eat before they get on the plane and eat when they get there? Would that not reduce a whole lot having all those meals and the weight of those meals, and the service of those meals requires more stewardesses to serve those mea's? I think we have to in this country recognize that people want the safest form of air travel possible, and if you have all these fringe benefits let them charter a plane or go some other way. We have to provide for the masses of people the most economical transportation possible.

Mr. SIMMS. I think the Board. Senator, has been moving in various directions to meet those needs. One way is through the development of charter policies. After all, charters represent the most efficient form

of transportation possible, because the cost of charter service does not minimize the operation of empty seats.

FULL FARES FOR CHILDREN WHO ARE CARRIED

Senator THURMOND. I want to ask you another question that affects me, and I see it does other people with children. Is there any reason why a 3-year-old child has to have a ticket if the parents hold him on their lap?

Mr. SIMMS. Senator, the airlines have historically offered free transportation to what are essentially babies in arms, persons

Senator THURMOND. Do the airlines do it or does the CAB require that?

Mr. SIMMS. No; the airlines. Under the tariffs that are filed by the airlines from time immemorial, children under 2 years have been carried free if they do not occupy a seat of their own. From 2 through 12 there is a discount for children. The Board has never had occasion to consider whether the 2-year cutoff is the right point at which to cut it off. The matter has not come before the Board.

Senator THURMOND. You have made it too costly for me to travel with these young babies I have got. I do not see why a 3-year-old child could not sit in the parents lap.

Mr. SIMMS. I suppose the next problem will be what about the 312or 4-year-old. You have to draw the line somewhere.

Senator THURMOND. Well, why not draw it up to 3 instead of 2, just increasing it a year? Now, Eastern tells me they would not object if I hold this little fellow on my lap, but they say that CAB requires that.

Mr. SIMMS. The Federal Aviation Act requires that Eastern adhere to its tariff. The Federal Aviation Act gives Eastern the right to file any tariff it pleases and the Board can suspend it and investigate it if the Board finds it is unlawful. I am not aware that Eastern has filed a tariff to authorize it to carry a 3-year-old without charge.

Senator THURMOND. At any rate, these are just things that have come to my attention as a man who rides the airlines every week, but it is getting very difficult. I will have to drive my automobile and take a lot longer time rather than to have to pay for all these children. It seems to me up until a child is 4 years old if the parent is holding him in his lap you ought to make some arrangement-in fact you ought to be encouraging them rather than riding in automobiles where they are more likely to get killed. I do not want to take much time on this, Mr. Chairman.

་

NEW ENTRY INTO THE INDUSTRY

Senator KENNEDY. Thank you, very much. Could I ask you, Mr. Chairman, how many new trunk carriers have been granted certification since 1950?

Mr. O'MELIA. Well, I listed all of them in my prepared testimony, Senator.

Senator KENNEDY. I think since 1950 there have not been any new trunk carriers, have there?

[In answer to question 19 of an extensive subcommittee questionnaire directed to the CAB in preparation for these hearings, the CAB indicated that between 1950 and 1974, 94 applications for new trunkline authority (of which 79 were for domestic authority) have been

51-146 76 pt. 1 43

made to the CAB, and none had been granted. The CAB's complete answer is reprinted in the separately bound appendix to these hearings.]

Mr. O'MELIA. I do not think so, Senator. However, some of the smaller carriers reached the statute of trunk during that time.

Senator KENNEDY. The reason that I raise this point is that it raises serious questions about the original intent of the Civil Aeronautics Act. When the Aviation Act was being considered in 1938, I note, looking through the legislative history, that Senator Truman was the floor manager of the bill. Senator King of Utah, I believe, said that he was concerned to know just how far the bill would freeze existing routes and corporations. He felt that if it would exclude others who might desire to enter this great field, that there should be some amendments. Senator Truman assured Senator King no such development was likely under the act as drafted. Yet we have seen that this has not, in fact, been the policy of the Board-speaking not of your Board in particular, but of the Board over the period of its past. The fact is that they have turned down some 94 applications by firms outside the industry. I am wondering whether this doesn't create at least a presumptive case that the Board doesn't want any new blood in the industry itself.

Mr. O'MELIA. On the contrary, I think that in 1938 there were just four so-called trunk carriers. Today, if you will look at some of the airtaxi operators we have in the United States, they are bigger than the four trunk carriers which were called trunk carriers in 1938. I think the Board in its history has probably moved in the direction of creating better service by extending the routes for the so-called smaller carriers, now the local service carriers by certificating all cargo carriers and by authorizing helicopter carriers, and other specialist types. It doesn't mean that if you wanted to come into the industry and had enough money to try for a 401 certificate under the Aviation Act, that you would be precluded. That possibility is still there. Until that is changed you have to follow the law.

Senator KENNEDY. It would appear by the way the statute is drafted, it is still there, but as a practical matter it doesn't appear to

be.

As I understand it, the four or five major trunk carriers operating in 1938 have just about the same percent of the market today as they had in 1938, except for American, which has gone from 28 to 15 percent. All the others remained just about the same. Also, in 1938 there were 16 trunk carriers, and today there are 10. What is the reaction of the Board, in terms of any new carriers? What will be the attitude of the Board in considering any requests for certification?

Mr. O'MELIA. Well, any carrier that applies certainly has the right to be heard. In my testimony I try to point out that a new carrier who seeks entry is at a great disadvantage against an existing, competing carrier, because a new carrier will probably only apply to operate between points a and b and probably has no beyond authority and couldn't compete with the existing carriers. That is on page 7 of my prepared testimony that I didn't go into.

Senator KENNEDY. It took, actually, an act of Congress to get the local service carriers permanently certificated, did it not?